Hong Kong, September 11, 2024 – Exchange Traded Fund (ETF) asset growth has hit new highs in the Greater China region, with investor demand fueling growth and 77% of investors predicting increased ETF use in the next year. The findings of the 7th Annual Greater China ETF Investor Survey from Brown Brothers Harriman & Co. (BBH), a global leading ETF custodian and administrator, show that ETFs and the strategies being deployed in Greater China are continuing to evolve.

The Greater China survey – a subset of BBH’s Global ETF Investor Survey - represents the opinions of more than 100 ETF investors from Mainland, Hong Kong and Taiwan, where 59% of respondents manage over USD$1 billion in assets and of which, 39% have 50% of their portfolio invested in ETFs (compared with 24% globally).

Key Findings:

GREATER CHINA: ETF growth leads APAC:

• Substantial growth for ETFs: For the first half of 2024, Greater China accounted for USD$102 billion of net new flows, representing 70% of all net new flows in APAC.
• Active ETFs on the rise: 84% of investors bought an active ETF in the last year. 45% cite index mutual funds as a top source from which they reallocated capital.
• ETFs used to access mega trends: 63% of investors plan to increase their exposure to thematic ETFs, with robotics and artificial intelligence, autonomous and electric vehicles, and cybersecurity strategies most in demand.
• ETFs as a tool to express investment views: 47% of investors are leveraging ETFs to express short term, tactical views.
• Issuers’ role critical: 63% plan to increase the number of issuers they work with. Of the tools and resources issuers provide, investors are most focused on product information and trading support.

MAINLAND: Cross border demand gains momentum:

• Outbound investment exposure grows: 71% of investors in China have invested into Hong Kong listed ETFs via the Qualified Domestic Institutional Investor (“QDII”) program or through the inclusion of ETFs in Stock Connect.
• Factors assist to manage risk: The ability to tilt portfolios through factors (value, growth, momentum, etc.) to achieve different outcomes stood out to Mainland investors with 43% of respondents most interested in these products.
• Thematic ETFs gain ground: Autonomous & electric vehicle ETFs are in demand as 50% of investors plan to increase their exposure to these products.

HONG KONG: One of the most diverse ETF product platforms in APAC:

• Expanding access to active ETFs: Interest in actively managed ETFs remains strong (40%), with 54% of investors using these products to manage liquidity and 51% as a replacement for active mutual funds.
• Leading demand diversification: Hong Kong was the first in the region to launch spot bitcoin ETFs this year, with crypto a lead actor in the demand diversification story. Hong Kong investors also highlighted interest in factors (29%) and thematic (29%) products.
• Dynamic tools for tactical and thematic allocations: 60% of Hong Kong investors utilize ETFs to express short term/tactical views, while 54% leverage ETFs to manage liquidity. Technology is a key play, as more than half (55%) of investors are planning to put investments towards robotics and artificial intelligence strategies, and 45% are also planning to invest in innovation strategies.

TAIWAN: Exceeding expectations and breaking records:

• Demand driven growth: Taiwan is one of the fastest growing ETF markets, with 87% of investors looking to increase their usage of ETFs. ETF AUM increased 120% from December 2022 to June 2024, with 70% of investors planning to increase the number of issuers they work with over the next year.
• Hunting for income through ETFs: Dividend ETFs have been an important contributor to growth, with 33% of investors interested in these products. Buffered ETFs (33%) are also a top choice as investors look to limit downside risk given market turbulence over the last number of years.
• Active ETFs get the green light: 57% of investors are planning to allocate capital to active ETFs, which is positive momentum given the recent regulatory announcement to allow active strategies in the market. 47% of investors are interested in multi asset products in the active wrapper.

“Greater China is a compelling ETF growth story and the data from this year’s survey shows that investors are embracing new ETF strategies even as they walk the line of income generation and risk management. We are seeing these markets expand product platforms to meet increasing demand for active, thematic, and multi asset and buffered strategies. We also see China cross border demand increasing.”

“Mainland, Hong Kong and Taiwan, represent significant opportunities for managers, with ample room for further expansion and opportunities for issuers. For issuers looking to enter or make further inroads, understanding the local demand dynamics will be key to capture the opportunities at play.” said Chris Pigott, Asia Head of ETF Services at BBH.

Read the full report here: 2024 Greater China ETF Investor Survey.

About Brown Brothers Harriman

BBH is a privately held, global financial services firm founded in 1818 and headquartered in New York City. BBH is known for its exceptional client service, technology expertise, and customized solutions. For 200 years its client-centric approach has fostered deep and lasting relationships built on commitment and trust. As a private partnership, free from the distractions of short-term or public market expectations, BBH is built to put clients first and create success that lasts.

BBH’s Investor Services business provides asset servicing, capital markets, and operating model solutions to many of the world’s leading asset managers and financial institutions. Asset servicing solutions include cross-border custody, accounting, and administration and related services. Capital markets solutions include operational and strategic foreign exchange and securities lending services. BBH’s operating model solutions solve for platform, data, and connectivity challenges across open-architecture operating models for asset managers, asset owners, and financial institutions.

BBH operates in over 90 markets worldwide from 18 offices. BBH employs approximately 6,000 professionals. For more information, please visit www.bbh.com.